06 March 2015

Are We On Track to Create 4 Million Jobs in 2015?

Today's jobs report has great news and yet it'll likely be reported with lots of caveats and caution.

Last year the economy created over 3 million jobs, something it hadn't done since 1999. And yet in the first two months of 2015, the economy has created 50% more jobs than it did in the first two months of 2014. 50% more. A rate that would translate into more than 4 million jobs for 2015. The American economy has created 4 million jobs only once, back in 1978. Back then, the labor force was only 100,000. Today it is 157,000, so creating 4 million jobs in 2015 would be more akin to creating 3 million in 1978. It is very plausible.

The unemployment rate is dropping faster now than it was at the beginning of the economic recovery. It's is now at 5.5% and yet the drop in unemployment rate is accelerating. Consumer confidence is up, credit markets are loosening, and companies are hiring.

But of course people will be commenting on wages. Inflation is near zero and wages are growing about 2.1% a year. Is that good?

What is curious about 2.1% wage growth? It will double wages in 33 years, meaning that the roughly $50,000 median wage for 2000 will be $100,000 in 2033, $200,000 in 2066, and $400,000 in 2100. Sound outlandish? It is what happened last century. And of course we will be able to buy things at the end of the century that we could not buy at its beginning. For instance, this week I ordered a personal genetic analysis kit for $79, a considerable discount from the $3 billion it cost for the first human genome sequencing completed in 2000, the first year of this century. It's impossible to predict what remarkable things our grandchildren will be able to buy in 2100 with their $400,000 salary.

And yet, all of today's analysis will begin or end with caveats about how wage growth isn't really growing enough ... about how people are still dropping out of the job market ... about how there is still some question about the recovery. It's hard to break the gloom and doom addiction, but this is, quite simply, more good news.